Earlier trading in share market was done orally but now it is not so, now trading in shares is done through computers and people place buy and sell orders. Now the trading platform has changed a lot and the brokers have made trading very easy.
What is Share Market
Stock market, equity market both these names are same. Share Market This is a market where trading is done in shares and people earn profit. But it can also be the opposite. The investor or trader who puts his capital at stake in this market.
Institutional and retail traders trade in trading. Institutional traders mean; Banks, Companies, Government and Big Traders | Retail traders mean; Public Trader (Local People) and Small Investor.
Stocks are classified by the domicile of the company. For example, there is Nestle in Switzerland and six is listed on the Swiss exchange. Therefore it is counted in the Swiss market.
Worldwide network of stock market
The stock market is traded for trillions of dollars worldwide. By 2020, all exchanges were traded for about $70.75 trillion. As of 2016, there were 60 stock exchanges in the world, out of which 16 are exchanges whose transactions are more than 1 trillion.
And if they look globally, up to 87% of the share is covered. Apart from the Australian Securities Exchange, it has 16 exchanges in North America, Asia and Europe.
The largest share market across the country as of January 2020 is the United States (54.5%) followed by Japan (7.7%) and then the UK (5.1%).
What is stock exchange ?
A stock exchange is an exchange where brokers are listed and provide the facility to buy and sell shares, bonds, currencies, indices.
Apart from one exchange, the shares of a big company are also listed in other exchanges, so that people from other countries also come to invest. Buying and selling of shares can also be done “over the counter” (OTC).
Stock exchange mainly works to create liquidity in the market.
Nowadays there are many stock exchanges where trading is done in electronic form through computers, such as Bombay Stock Exchange of India, National Stock Exchange of India.
A potential seller asks a specific price for a stock, and a potential buyer bids a specific price for the same stock.
The main function of the stock exchange is to create a facilitation between the buyer and the seller.
Short selling is a method in which traders sell the stock on behalf of their broker and wait for the stock price to fall. If the stock price falls, the trader makes profit, but if the stock price rises, the trader loses.
If understood in simple language, then short selling means taking shares from the broker and selling them. But after some time the broker has to return those shares after buying.
Margin trading means trading with credit money. The trader takes money from his broker on the % of deposit capital and trades there. Every broker gives credit facility to their traders in different %.
In Margin trading after losing a fixed capital one has to add more funds/capital to your trading account to continue trading/trade.
Margin call is also given to the trader when his funds are short enough to continue the trade in the market. Margins were implemented by the Federal Reserve after the 1929 market crash.
Types of Financial Markets
The financial market is divided into different categories.
Money Market: Money market is a market in which financial and money are traded in short term. The time period of one year or less than one year is maturity.
Capital Market: Capital market is a market in which trade is done for medium and long term. Capital trading in this market is done in the form of investors.
Negotiation phase of financial assets
Primary Market: Assets in the primary market are created directly through the issuer.
Secondary Market: The assets issued earlier are exchanged in the secondary market. This market gives the freedom to sell the financial assets which have the assets bought.
It is very important to understand the technical and fundamentals in the market for trading. Because both these analysis of market play an important role.
Fundamental analysis means; News, speech, company change business idea, injection of liquid cash etc.
Technical analysis means; Understanding Charts with Trend Lines. Charts are studied in technical analysis like price action, past performance etc.
Fundamentals analyze the company’s financial statements, and then buy and sell stocks.
When to buy shares in share market
Shares of companies are bought and sold in the share market and the same is called trading. But trading in the share market is as easy as it is difficult because the faster money is earned in this market, the faster it is also lost.
Before entering the share market, it is very important to take experience that when the share price will go up and when will it fall.
“Trading without a Diary is like shaving without a mirror”
There are many news channels, newspapers, websites etc. nowadays to see the news of share market. Never take a loan in trading, no matter how much confidence you have, otherwise you can become a part of very bad financial condition.
Study a good company before buying its shares, what can happen in the future of the company and what is the long term vision of the company, on the basis of that you buy shares of that company.
For example: Colgate is a company that makes toothpaste, now if we talk about the future of this company, then this company can grow because people will not stop buying toothpaste.
Also, it is very important to study the management of the company that what is the target of the company, how much is the debt burden on the company.
Many people come in the market who lose money, their main thing is to do it;
- Get rich quicker.
- Using more leverage.
- Enter the market without any knowledge.
- And trading at the behest of others (when to buy and sell).
How to buy shares:
To buy shares, you must have a Demat account, just as a bank account is needed to keep money in the bank, similarly to trade in the share market, it is necessary to have a Demat account.
Before opening a Demat account, read the broker’s background and its terms and conditions thoroughly. Each broker has its own conditions such as minimum deposit and minimum withdrawal.
So first make sure that what are the conditions of the broker so that there is no problem later.
There is good support of the broker, some brokers also provide a means to study marketing to their clients. After selecting a good broker, deposit money and start trading.
There is a separate regulated body to regulate each broker. This regulated body avoids the scam of the investor’s money and makes rules for the broker, so that people can comfortably use their money in trading.